Here we go again!
This time I have a whole pillowcase of PTSC shares to cushion
the crash landing (VBG).
FWIW, here's the text of the article.
Video-on-demand leads digital
TV invasion
By Emory Thomas, Jr., MSNBC
February 27, 1998 9:29 AM PST
Forget Internet browsing. Forget high-definition
pictures. Forget even e-mail. Video-on-demand,
dismissed for years as too expensive and too
unwieldy to install for the masses, is probably the
most powerful feature on the upcoming
digital-television menu. And finally, the
entertainment industry is beginning to wake up to
its potential.
You're at home lounging on the couch, and nothing
good is on the TV schedule. No worry. You simply
aim your remote control and switch to a
video-on-demand channel. Punch a button and you
can immediately start one of about 500 different
movies. If a two-hour film seems too long, you can try
a sitcom, perhaps that "Mad About You" episode you
missed recently.
A video-on-demand system like this, of course, is the
nightmare scenario for Blockbuster and other
video-rental chains -- the long-forecast, and previously
overestimated, catalyst of their extinction. But it may
well be the killer app of digital television, the
nationwide TV upgrade that's coming soon from a
cable operator near you. Imagine no late-night trips to
the rental store. And never any late fees.
Too good to be true?
It certainly was in the past. Time Warner and others
spent hundreds of millions of dollars in the early 1990s
trying out technically bulky systems with no grounding
in real-life economics. Set-top boxes costing
several-thousand dollars each were installed for free in
homes, and then connected to giant file servers costing
much more than that. The experiments demonstrated
healthy demand for certain enhanced TV services, yet
yielded no way to justify the costs.
But both the technology and the economics have
changed drastically in only a few years. A new
generation of digital set-tops costing about $300 each
is now beginning to enter the 65 percent of American
homes subscribing to cable-TV service. File-servers,
used to feed digital programs to users from a central
office, are now several times cheaper -- and more
powerful -- as well. (To indulge in some cable-speak,
the cost of installing a single client-server "stream" is
plummeting to about $500 from several thousand
dollars earlier this decade. That's a significant
decrease, considering that $1,000 per stream is widely
considered to be the threshold of cost-effectiveness.)
To date, Internet-like services have stolen much of the
limelight in the hype over digital TV. With so many
millions of people browsing the Web and chatting via
e-mail on their computers, it's no wonder that the
Internet looms large in interactive-programming plans.
But as implementation dates get closer, entertainment
companies increasingly wonder whether people will
actually use their television sets like they use their
computers. And the companies are also wondering
how they're going to make any money with all these
new capabilities.
Enter video-on-demand. The market is obvious.
Americans spend roughly $8 billion a year renting
video tapes from corner stores. They shell out several
billion dollars more for other forms of home
entertainment, such as purchased video tapes and
pay-per-view shows.
So suddenly, video-on-demand is regaining its lost
luster. "Video-on-demand has kind of bumped back
up the priority list," says Sean Kaldor, analyst with
International Data Corp. "They think it's a concept
whose time has come."
"Clearly," says Bill Wall, chief scientist-subscriber
systems for Scientific-Atlanta, the cable operators "see
[video-on-demand] as their No. 1 added application
beyond broadcast services." Scientific-Atlanta, a
maker of equipment for cable companies, is now
making and shipping hundreds of thousands of set-top
boxes with video-on-demand capabilities.
Meanwhile, video-on-demand trials are now springing
up across the country like so many geysers. Two
different cable operators in Pennsylvania are testing a
service built by Diva Systems, operating under the
brand name OnSet.
In Pennsylvania, customers pay $5.95 a month for
access to the video-on-demand service, then $3.95 for
each new-release movie and $2.95 for each older title.
Diva, which bears the cost of installation, pays a fee to
Hollywood studios for access to their content, and the
company then splits the remainder evenly with the
cable operator.
With the clamor for video-on-demand services rising,
new rivalries are quickly emerging. Diva Systems is the
industry's granddaddy, having resulted from an RCA
Labs project begun some 15 years ago. But snipers
are quickly appearing.
One competitor, known as Intertainer, emerged from
obscurity just a couple weeks ago. Backed by cable
giant Comcast and chip maker Intel, Intertainer can
stream a wide variety of movies, games and other
programming to anyone with a recent-model computer
and a high-bandwidth connection through a cable or
DSL modem. The company is developing a TV
set-top-box-based delivery system as well.
To Diva and Intertainer, video-on-demand should
almost sell itself. "The problem for anyone in the
modern age is that the most precious asset is time,"
asserts Jonathan Taplin, Intertainer's co-chairman.
"And TV today doesn't work on your time ... What the
Internet has taught us is to get what you want when
you want it."
And yet, the sell job is hardly complete. One cable
executive, who heads the engineering operations for a
large operator, says he still has to be convinced that
with video-on-demand he's not cannibalizing his
existing revenue streams. In other words, with a jillion
movies and hit sitcoms to watch on demand, who is
going to sign up for a bunch of premium channels and
pay-per-view services?
"My analogy," he says, "is that with video-on-demand,
you move money from the left pocket to the right
pocket, but you spill some of it along the way."
ndeed. But thanks to the pervasive video-rental habit
that's been stoked by the likes of Blockbuster, some
new money will be falling from the sky as well.
And for that reason, the fast-approaching digital-TV
era is likely to bring video-on-demand into our homes
sooner rather than later. |
